01-01-2008, 07:13 PM | #1 | |
Auto Pilot
Drives: Gunmetal Join Date: Feb 2007
Location: L.A.
Posts: 1,307
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Americans increasingly going upside down on auto loans
This kills me as an auto loan should be the most simple debt (next to credit car debt) to manage. Like they say though, "common sense ain't so common anymore". Why would anyone roll residual debt from an old auto loan into a one for a newer car doesn't make sense to me at all.
Quote:
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"Let the rest of the world dream of Ferraris, Lamborghinis and dinky little British two-seaters. In this country speed doesn't look like that." Got SS?
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01-01-2008, 09:28 PM | #2 |
Drives: 2010 Camaro SS Join Date: May 2006
Location: Southern NJ
Posts: 2,260
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It's common. I've only ever had one auto loan I wasn't upside down on when I traded for a new vehicle.
Just one more reason I'd prefer to lease. There's little you can do to control being upside down unless you have a lot of xtra money. OR take a cheap car you're not really happy with. When I went in for my current vehicle I knew I was upside down by $3000 on my last loan. It was one thing that limited the price of the car I was looking at. I just wanted/needed a car with a lesser payment (I went from $450 to $290). But I'd prefer having a higher payment... This car is boring and no fun to drive. I'm willing to go 'upside down' a little if it means I can have something I like over 'just what I need'. I'm hoping to have this current vehicle about even by the time I trade for the Camaro. It's currently about $2000 upside down. But the rate of it's depreciation seems to have leveled out (I check kbb.com every so often). So in a little over a year I should have over $3500 more paid down. I doubt it will depreciate enough by that time to remain upside down. And if it does, it won't be by much. (It will help that I put VERY few miles on my cars. I've had my car 2 Years and 8 Months. I have 19,800 miles... I should still have under 30,000 by the time I trade it.) |
01-01-2008, 10:15 PM | #3 |
I used to be Dragoneye...
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Maybe I'm slow...but what does ''upside down" mean, exactly?
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01-01-2008, 10:40 PM | #4 |
Auto Pilot
Drives: Gunmetal Join Date: Feb 2007
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In the context of this particular discussion, "upside down" means instead of people having their loans paid off by the time they take out another auto loan for a "new" car they'll have residual debt incurred from that last loan carried over to the new loan.
Ones key financial goal should be to have little next to no debt whatsoever. Otherwise focus on minimizing debt before any additional spending or incurring further debt. How you manage debt determines your buying power, both present and future. That's what I was taught at least.
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"Let the rest of the world dream of Ferraris, Lamborghinis and dinky little British two-seaters. In this country speed doesn't look like that." Got SS?
Last edited by Scotsman; 01-01-2008 at 10:51 PM. |
01-01-2008, 10:42 PM | #5 |
I used to be Dragoneye...
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ahhhhh...gotcha! Thanks
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01-01-2008, 11:07 PM | #6 |
Moderator.ca
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I believe upside loans are where the amount owed is greater than the value of the vehicle. So all car loans would start out as being upside down unless you pay 50% down or more. I think . . .
Maybe im missing something but if you are thinking of buying a new car and are upside-down on your current one, wouldn't it be best to stick it out for a while rather than get deeper in debt? Or is it possible that some people are completely clueless when it comes to these things? My family has never bought a brand new car, always got something used. We have been fine, though I really want to buy a brand new Camaro. I won't do it until I can afford it. This summer I will buy something thats about 5 years old for $5000, thats all i can afford! I won't pay 27k over 5 years towards a car (the interest is a killer), I'd rather pay 5k then pay 2k in repairs for the same time period, gives me an extra 20 grand. I anticipate that the Camaro will cost me up to 40k (Canadian pricing sucks!), and I will be able to make a 15k down payment. It may be 2011 or even 2012 before I can do this, but I will wait. Then, I pay off the rest of the Camaro over the next few years. Then keep it for a long time.
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__________________ Originally Posted by FbodFather My sister's dentist's brother's cousin's housekeeper's dog-breeder's nephew sells coffee filters to the company that provides coffee to General Motors...... ........and HE WOULD KNOW!!!!__________________ Camaro Fest sub-forum |
01-01-2008, 11:19 PM | #7 |
Drives: 98 Trans am 00 Trans am 01 corvette Join Date: Mar 2007
Location: West Virginia
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you mention controlling credit card debt most Americans don't do that either, that's why our economy is in the state it is in.. most American families only talk about money when things are bad. it's not a skill that is taught in high school or many college degree programs.. common since.. but even that needs guidance some times.
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2001 Corvette Heads,Big cam, 4:11, Custom Exhaust, MGW Shifter Baer Eradispeed +2 2 pieces rotors, Hotchkiss swaybars. and a few other little things. 1998 Trans Am A4 ( was STS turbo until the turbo and oil pump died) 2000 WS6 Trans AM under the knife ( sadly turned into long term project. |
01-01-2008, 11:39 PM | #8 |
Auto Pilot
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^ Right on point DG.
I refuse to carry any residual debt of my current auto loan to one I'd use for my 5thgen. I'd cringe just that much more looking at my new Camaro everytime I'm walking to get in it, and I don't want that. Once my current car is paid OFF and I've saved 10k or more for my d.p. I'm good to go. Just have to wait for another 5.5 years or less to get there. A small and far better compromise to make compared to the alternative. There's absolutely nothing wrong with delayed gratification, a concept that seems all but long forgotten in todays society.
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"Let the rest of the world dream of Ferraris, Lamborghinis and dinky little British two-seaters. In this country speed doesn't look like that." Got SS?
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01-02-2008, 11:30 AM | #9 | |
SoCal Race Team #13
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Quote:
Personally I never buy a new car unless the one I currently own is paid off.. Period. At the moment my truck has payments until 2010, but with the extra payments I am doing it should be paid off mid to late 2009. Then it will get traded in. Oh and I refuse to do more than a 5 year loan on anything (except the house, and thats ALWAYS a 30 year fixed intrest loan, screw these interest only or arms that are now screwing over so many americans) Smart financial management is such a lost skill to most people nowadays.
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01-02-2008, 11:54 AM | #10 |
I used to be Dragoneye...
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Yup. Now combine that with these lenders who befuddle everybody with their mumbo-jumbo. Then say "sign here". That doesn't help. (cough, cough- variable rates -cough, cough)
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01-02-2008, 11:58 AM | #11 |
GM Guy For Life
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Being upside down on a loan...any loan...means that the loan is "outstanding" for more than the item (car, home, etc) is worth. If there was no downpayment or the downpayment was minimal, then the loan pretty much starts out upside down (unless there was a great deal to begin with...even then, on a car, it turns upside down pretty quickly.). Carrying any loan amount over to the next car is a terrible idea, period.
Credit card "debt" is easy to manage....my wife and I basically use the credit card to "build up good credit" and to keep from writing checks for everything...if we don't have the money in our checking account to pay for an item, we don't buy it. We just write one check at the end of the month to the credit card company and we're done with it. I even tried to "charge" my Silverado when I bought it (okay, not the full amount, just the balance after the two trade in's I had at the time and, I was using my GM card to build up for the next purchase....). The dealer just wasn't equipped to handle charging a vehicle. I don't do car loans any more. If we can't write a check for it (again, the balance after counting the trade), then we don't get it. We just agreed yesterday, as a matter of fact, on the new Enclave. The dealer finally came down to our number. We had a set amount we were willing to spend (cash outlay) and that was it. So we are ordering an Enclave, trading in the Tahoe and paying some cash. In mid-February when we get our new vehicle, it will be paid off already. But, not everyone can afford to pay for the entire vehicle...I get that...but even car loans are easy. Don't get more loan than you can afford to pay for. Yes, that almost always means getting less car than you want, but that's what you should do. Of course, I don't think lenders should approve people for the most of the loans that they do anyway. When I was working at the Lexus dealer, the finance guy actually told me that 51% of the people that come in to buy cars can't afford them. If that's known ahead of time, why are the lenders allowed to approve them? That's ridiculous. I'm all for people being responsible for themselves, but because of what it ends up doing to the economy, because of what it ends up costing other people, I think there should be some tighter regulations on the loan process (cars, houses, everything). |
01-02-2008, 10:08 PM | #12 |
Drives: 2006 Cobalt, 2004 Taurus wagon Join Date: Oct 2007
Location: California
Posts: 3,812
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That was a fantastic article. I saw stupid stuff like that so much when I worked at the dealership, and this is exactly what I have been warning so many people about. I'm not selling my Cobalt and getting my Camaro until I have a year or less left on the loan. I'll most likely just pay it off first. Not that much longer.
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01-02-2008, 11:48 PM | #13 |
ritired suthern gentlman
Drives: nothing now Join Date: Sep 2007
Location: MO
Posts: 199
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I just think that article is so funny. It actually makes me feel better. I still drive my first car that I paid $1300 cash for. I see stupid people with crap jobs driving very nice & new vehicles and I used to wonder why. I can sleep at night because I have a small amount of Student loans to pay. Not $30,000+.
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